Link

Embed (HTML)

SECTION
1. PURPOSES. The Agere Systems Inc.
Non-Employee Director Stock Plan (the Plan) is intended to promote the
interests of Agere Systems Inc. (the Company) and to enable the Company to
attract and retain qualified persons to serve as directors, to enhance the
equity interest of directors in the Company, and to solidify the common
interests of its directors and stockholders in enhancing the value of the
Companys common stock (Shares). The Plan seeks to encourage the highest
level of director performance by providing directors with a proprietary
interest in the Companys performance and progress. These purposes shall be
achieved by the granting of options to purchase Shares (Options), restricted
Shares (Restricted Stock), and restricted stock units (Restricted Stock
Units) (collectively, Awards) to members of the Board of Directors of the
Company (the Board) who are not employees of the Company (Non-Employee
Directors). Under the Plan no Options will be granted which are qualified as
incentive stock options.

SECTION
2. ADMINISTRATION OF THE PLAN. The Plan shall
be administered by the Compensation Committee (the Committee) of the Board. The
Committee shall, subject to the provisions of the Plan, have the power, in its
absolute discretion, to make discretionary grants of Options, Restricted Stock
and Restricted Stock Units to Non-Employee Directors in addition to or in lieu
of the automatic grants set forth in Sections 5(b) and 5(c) hereof, to set the
terms for any such discretionary grants, to construe the Plan, to determine all
questions hereunder, to adopt and amend such rules and regulations for the
administration of the Plan as may be determined by the Committee, and to make
any other determination and take any other action that the Committee deems
necessary or desirable for the administration of the Plan. Decisions of the
Committee shall be final, conclusive and binding upon all persons, including
the Company and all Award holders (each a Grantee).

SECTION 3. SHARES SUBJECT TO THE PLAN.
The total number of Shares which shall be available under the Plan from and
after the Effective Date (as defined in Section 13) shall be 500,000 in the
aggregate, subject to adjustment as provided in Section 9. The Company
shall at all times reserve such number of Shares as will be sufficient to
satisfy the requirements of the Plan and outstanding Awards. Any Shares issued
hereunder may consist, in whole or in part, of authorized and unissued Shares,
treasury Shares, Shares purchased in the open market or otherwise or any
combination thereof, as the Board or the Treasurer of the Company may from time
to time determine. The underlying Shares with respect to the unexercised
portion of any expired, terminated, forfeited or canceled Award shall again be
available for use under the Plan.

SECTION
4. ELIGIBILITY. Only Non-Employee Directors are
eligible to receive Awards under the Plan.

SECTION
5. TERMS OF OPTIONS. Unless otherwise
determined by the Committee, the following shall apply to Options granted under
the Plan:

1

AGERE SYSTEMS INC. NON-EMPLOYEE
DIRECTOR STOCK PLAN

(a)

The per
share purchase price of the Shares covered by an Option granted pursuant to
the Plan shall be 100% of the Fair Market Value of one Share on the day the
Option is granted. The Option price will be subject to adjustment in
accordance with the provisions of Section 9 hereof. For purposes of the Plan,
the Fair Market Value of a Share means the average of the highest and
lowest reported sales prices, regular way, of Shares in transactions reported
on the New York Stock Exchange on the date of determination of Fair Market
Value, or if no sales of Shares are reported on the New York Stock Exchange
for that date, the comparable average sales price for the last previous day
for which sales were reported on the New York Stock Exchange.

(b)

On the date
that any person first becomes a Non-Employee Director, such person shall
automatically be granted on such date, without further action by the Board or
the Committee, an Option with respect to 10,000 Shares.

(c)

Each year,
on December 1, or such other date as may be determined by the Committee, each
Non-Employee Director shall be automatically granted on such date, without
further action by the Board or the Committee, an Option to purchase 10,000
Shares.

(d)

Each Option
granted under subsection 5(b) or subsection 5(c) shall become exercisable on
the first anniversary of the date of grant.

(e)

The last day
to exercise an Option shall be the day preceding the seventh anniversary of
the date of grant, after which time the Option shall expire.

(f)

Each Option
shall be exercised in accordance with procedures established by the Company
accompanied by payment in full of the purchase price for the Shares subject
to the Option. Payment for such Shares may be made (as determined by the
Committee at the time of exercise) (i) in cash, (ii) by check, acceptable to
the Company, payable to the order of the Company in the amount of such
purchase price, (iii) by delivery to the Company of Shares having an
aggregate Fair Market Value equal to such purchase price, which shares shall
have been held by the Grantee for at least six months, (iv) by irrevocable
instructions to a broker to sell the Shares to be issued upon exercise of the
Option and to deliver promptly to the Company the amount of sale proceeds
necessary to pay such purchase price and any applicable withholding taxes, or
(v) by any combination of the methods of payment described in (i) through
(iv) above.

(g)

A Grantee
shall not have any of the rights of a stockholder with respect to the Shares
subject to an Option unless and until such Shares are issued to the Grantee.

(h)

Unless
otherwise determined by the Committee prior to the time of transfer, no
Option shall be transferable, except by will or the laws of descent and
distribution, and any Option may be exercised during the lifetime of the Grantee
only by him or her. No Option granted under the Plan shall be subject to
execution, attachment or other process.

-2-

AGERE SYSTEMS INC. NON-EMPLOYEE
DIRECTOR STOCK PLAN

SECTION 6. RESTRICTED STOCK. Shares
of Restricted Stock may be awarded hereunder, for no cash consideration or for
such minimum consideration as may be required by applicable law, either alone
or in addition to other Awards granted under the Plan. Shares of Restricted
Stock shall be awarded with the restriction that the holder may not sell,
transfer, pledge, or assign such Shares and with such other restrictions as the
Committee, in its sole discretion, may impose (including, without limitation,
any restriction on the right to vote such Shares, and the right to receive any
cash dividends). Such restrictions may lapse separately or in combination at
such time or times, in installments or otherwise, as the Committee may deem
appropriate. Any Shares of Restricted Stock awarded hereunder may be evidenced
in such manner as the Committee in its sole discretion shall deem appropriate,
including, without limitation, book-entry registration or issuance of a stock
certificate or certificates. In the event any stock certificate is issued in
respect of a Restricted Stock Award, such certificate shall be registered in
the name of the Grantee, and shall bear an appropriate legend referring to the
terms, conditions, and restrictions applicable to such Award.

SECTION 7. RESTRICTED STOCK UNITS.
Restricted
Stock Units may be awarded hereunder. Awards of Restricted Stock Units shall be
valued by reference to a designated number of Shares, which value shall be paid
to the Grantee by delivery of Shares upon the lapse of such restrictions as the
Committee, in its sole discretion, may impose. Such restrictions may lapse
separately or in combination at such time or times, in installments or
otherwise, as the Committee may deem appropriate. Any Restricted Stock Units
awarded hereunder may be evidenced in such manner as the Committee in its sole
discretion shall deem appropriate. Restricted Stock Unit Awards may be issued
for no cash consideration or for such minimum consideration as may be required
by applicable law.

SECTION
8. TERMINATION OF AWARDS.

(a)
In the event a Grantee ceases to be a member of the Board for any reason other
than death, (i) any portion of any Option granted to such Grantee, which at the
time of such cessation is then exercisable, shall remain exercisable during the
remainder of the term of the Option, (ii) any portion of any Option which is
not then exercisable shall terminate, and (iii) any portion of any other Award
which is not then vested shall be forfeited and terminate.

(b)
In the event that a Grantee ceases to be a member of the Board by reason of his
or her death, (i) each unexercised Option granted to such Grantee shall
immediately become exercisable and each outstanding, unexercised Option granted
to such Grantee may be exercised by the Grantees personal representative, heir
or legatee for the remainder of the term of the Option, and (ii) any unvested
portion of any other Award shall immediately become vested and non-forfeitable.

SECTION 9. ADJUSTMENTS UPON CHANGES IN
CAPITALIZATION. In the event of any merger, reorganization,
consolidation, recapitalization, stock dividend, stock split, reverse stock
split, spin-off or similar transaction or other change in corporate structure
affecting the Shares, such adjustments and other substitutions shall be made to
the Plan and to Awards as the Committee in its sole discretion deems equitable
or appropriate, including without limitation such adjustments in the aggregate
number, class and kind of shares which may be delivered under the Plan, in the
number, class, kind and option or exercise price of shares subject to

-3-

AGERE SYSTEMS INC. NON-EMPLOYEE
DIRECTOR STOCK PLAN

outstanding Awards
(including, if the Committee deems appropriate, the substitution of similar
options to purchase the shares of, or other awards denominated in the shares
of, another company) as the Committee may determine to be appropriate in its
sole discretion, provided that the number of Shares or other securities
subject to any Award shall always be a whole number.

SECTION 10. FURTHER CONDITIONS OF
EXERCISE.

(a)
Unless prior to the vesting, exercise or transfer of an Award, as applicable, the
offer and sale of the Shares issuable upon such vesting, exercise or transfer,
as applicable, are the subject of an effective registration statement filed
with the Securities and Exchange Commission pursuant to the Securities Act of
1933, as amended (the Securities Act), and a prospectus meeting the
requirements of Section 10(a)(3) of the Securities Act has been
distributed to the Grantees, the Company shall be under no obligation to honor
any such vesting, exercise or transfer, as applicable, unless the Committee
determines otherwise in which case the notice of vesting, exercise or transfer,
as applicable, with respect to such Award shall be accompanied by a
representation or agreement of the Grantee to the Company to the effect that
such shares are being acquired for investment only and not with a view to the
resale or distribution thereof in violation of the Securities Act, or such
other documentation as may be required by the Company, unless, in the opinion
of counsel to the Company, such representation, agreement or documentation is
not necessary to comply with the Securities Act.

(b)
Anything in subsection (a) of this Section 10 to the contrary
notwithstanding, the Company shall not be obligated to issue or sell any Shares
until they have been listed on each securities exchange on which the Shares may
then be listed and until and unless, in the opinion of counsel to the Company,
the Company may issue such shares pursuant to a qualification or an effective
registration statement, or an exemption from registration, under such state and
federal laws, rules or regulations as such counsel may deem applicable. The
Company shall use reasonable efforts to effect such listing, qualification and
registration, as the case may be.

SECTION 11. TERMINATION AND AMENDMENT OF
PLAN.
The Board may at any time terminate the Plan or make such modification or
amendment thereof as it deems advisable; provided, however, that the Board may
not, without approval by a majority of the Shares present in person or by proxy
and entitled to vote thereon increase the maximum number of Shares available
for use under the Plan. Termination or any modification or amendment of the
Plan shall not, without consent of a Grantee, negatively affect his or her rights
under an Award previously granted to him or her.

SECTION 12. CHANGE IN CONTROL. In
the event of a Change in Control, as defined below, all outstanding Options which
are not then exercisable shall become immediately exercisable. A Change in
Control of the Company shall be deemed to occur upon:

(a)

An
acquisition by any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the Exchange
Act)) (an Entity) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the
then outstanding shares of common stock of the Company (the Outstanding

-4-

AGERE SYSTEMS INC. NON-EMPLOYEE
DIRECTOR STOCK PLAN

Company
Common Stock) or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election
of directors (the Outstanding Company Voting Securities); excluding,
however, the following: (1) any acquisition directly from the Company, other
than an acquisition by virtue of the exercise of a conversion privilege
unless the security being so converted was itself acquired directly from the
Company, (2) any acquisition by the Company, (3) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, or (4) any acquisition
by any corporation pursuant to a transaction which complies with clauses (A),
(B) and (C) of subsection (c) of this Section 12; or

(b)

A change in
the composition of the Board during any two year period such that the
individuals who, as of the beginning of such two year period, constitute the
Board (such Board shall be hereinafter referred to as the Incumbent Board)
cease for any reason to constitute at least a majority of the Board; provided,
however, that for purposes of this definition, any individual who
becomes a member of the Board subsequent to the beginning of the two year
period, whose election, or nomination for election by the Companys
stockholders, was approved by a vote of at least a majority of those
individuals who are members of the Board and who were also members of the
Incumbent Board (or deemed to be such pursuant to this proviso) shall be
considered as though such individual were a member of the Incumbent Board;
and providedfurther, however, that any such individual
whose initial assumption of office occurs as a result of or in connection
with a solicitation subject to Rule 14a-12(c) of Regulation 14A promulgated
under the Exchange Act or other actual or threatened solicitation of proxies
or consents by or on behalf of an Entity other than the Board shall not be so
considered as a member of the Incumbent Board; or

(c)

The approval
by the stockholders of the Company of a merger, reorganization or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company (each, a Corporate Transaction) or, if consummation
of such Corporate Transaction is subject, at the time of such approval by
stockholders, to the consent of any government or governmental agency, the
obtaining of such consent (either explicitly or implicitly by consummation);
excluding however, such a Corporate Transaction pursuant to which (A) all or
substantially all of the individuals and entities who are the beneficial
owners of the Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Corporate Transaction will beneficially
own, directly or indirectly, more than 50% of the outstanding shares of
common stock, and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors of the corporation
resulting from such Corporate Transaction (including, without limitation, a
corporation or other Person which as a result of such transaction owns the
Company or all or substantially all of the Companys assets either directly
or through one or more subsidiaries (a Parent Company)) in substantially
the same proportions as their ownership, immediately prior to such Corporate
Transaction, of the Outstanding

-5-

AGERE SYSTEMS INC. NON-EMPLOYEE
DIRECTOR STOCK PLAN

Company
Common Stock and Outstanding Company Voting Securities, (B) no Entity (other
than the Company, any employee benefit plan (or related trust) of the
Company, such corporation resulting from such Corporate Transaction or, if
reference was made to equity ownership of any Parent Company for purposes of
determining whether clause (A) above is satisfied in connection with the
applicable Corporate Transaction, such Parent Company) will beneficially own,
directly or indirectly, 20% or more of, respectively, the outstanding shares
of common stock of the corporation resulting from such Corporate Transaction
or the combined voting power of the outstanding voting securities of such
corporation entitled to vote generally in the election of directors unless
such ownership resulted solely from ownership of securities of the Company
prior to the Corporate Transaction, and (C) individuals who were members of
the Incumbent Board will immediately after the consummation of the Corporate
Transaction constitute at least a majority of the members of the board of
directors of the corporation resulting from such Corporate Transaction (or,
if reference was made to equity ownership of any Parent Company for purposes
of determining whether clause (A) above is satisfied in connection with the
applicable Corporate Transaction, of the Parent Company); or

(d)

The approval
by the stockholders of the Company of a complete liquidation or dissolution
of the Company.

SECTION 13. EFFECTIVE DATE; TERM OF PLAN.
The Plan originally became effective as of March 26, 2001 (the Effective Date).
For purposes of computing compliance with the limit on Shares available under
the Plan in Section 3, appropriate adjustments shall be made to Options granted
on or before May 27, 2005, to reflect the Companys 1-for-10 reverse stock split
on May 27, 2005. The Plan shall expire when Shares are no longer available for
the grant, exercise or settlement of Awards, unless the Board terminates the
Plan earlier.